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Writer's pictureHendrik Oudeman

Introduction to selling a business (2)

Updated: Oct 8

B.A. Boss offers a small guide so that business or company owners can better prepare in case they want to sell their companies. In Spain it is estimated that in the next 5 years there will be some 400,000 companies for the succession, or to be sold or closed. Unfortunately the biggest part ends with a closure: almost a million (!) companies have decommissioned in the last 10 years. This is the second of 5 articles in which we give a little more detail to the process of a sale.




2- The first steps of the sale of companies Alright, let's assume that you really have decided to take at least the first few steps to sell your business. Before you even think about listing your business, there are a few things you should do. The first thing is to collect information about your company. Here is a list of items to collect

  • Financial statements for the last three years

  • List of fixed assets and equipment

  • The lease and related documents

  • A list of business loans (amounts and repayment terms)

  • Copies of equipment leases

  • A copy of the franchise agreement, if applicable

  • An approximate amount of inventory, if applicable

  • The names of some external advisers.


If you're a small business owner, you'll need to educate yourself on some of these items. After you collect all of the above information, you must complete and update it. Surely you will have forgotten a lot of this information, so you should pay close attention to it. You should have all of the above arranged as if you were going to present it to a potential buyer. It all starts with this information. Make sure the business tax returns are current and as accurate as you can get them. If you are in the middle of the current year, make sure you have data from last year. If you need it, you can pay for professional help to put your returns in order. As you will see later, the valuation of a small business is generally based on its liquidity. This includes business profits, as well as the owner's salary and earnings, depreciation, and other non-cash factors. Don't panic if the balance isn't what you think it should be. When all the items are added to the balance sheet, the liquidity can look quite good. Potential buyers typically want to review the company's financial data. A balance sheet is not usually necessary unless the sale price of your business was over a million euros. Buyers want to see rent and expenses. They want to know if they can make the company payments (more on that later) and still earn a living. Let's face it, if your business can't provide someone with a salary, it probably can't be sold. You can find a buyer who is willing to take the risk, or an experienced industry professional looking only for the location, etc. and feel that you can grow the business.


The big question is not really how much your company will sell for, but how much money can you have left? Tax laws determine how much money you can actually keep in the bank. The way your business is legally incorporated can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership, or property? There are taxes that affect certain businesses. The bottom line in all of this is that before you consider pricing or selling your business, you need to discuss the tax implications of the sale with a tax advisor. No one wants to be in the middle of a transaction with a solid buyer and find out that the tax implications of the sale are going to net them much less than they had calculated. Buyers buy companies for many of the reasons that sellers sell their companies. It is important that the buyer is as serious as the seller when buying a business. If the buyer is not serious, the sale will never close. Some of the reasons for buying companies are the following:


  • Layoff or transfer (or about to be)

  • Early retirement (forced or not)

  • Job discontent

  • Desire for more control over one's life

  • Desire to be self-employed

  • Desire to start a business with a portfolio of clients

  • Desire for expansion or growth of the company itself In the third part we see what profile a business buyer may have.


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